When we take a mortgage loan, in many cases the first thought will be to cancel it as quickly as possible. However, there are several factors that must be taken into account when preparing a mortgage loan . In this article we will know if it is possible to prepay a mortgage loan , how to do it, when to do it and its cost.

## Can I prepay my mortgage loan?

Prepayment is a customer right. The mortgage loan can be prepaid partially or totally in advance before the expiration date previously agreed with the bank. However, the date of contraction should be considered:

- If the mortgage loan was granted before November 4, 1997, the total or partial prepayment implies the payment of the adjusted capital up to the day of the effective payment and the stipulated interest calculated on said capital, for the entire term agreed.
- If the mortgage loan was granted between November 4, 1997 and June 26, 2004:
- If the amount of the credit is greater than $ 5,000, advance payments will be freely agreed between the creditor and the debtor.
- If the amount of the credit is equal to or less than $ 5,000, the partial or total prepayment implies the payment of the anticipated capital plus the interest calculated until the payment date, plus the prepaid commission.
- Advance payments of less than 25% of the balance of the obligation will always require the consent of the creditor.

- If the mortgage loan was granted after June 26, 2004:
- If the amount of the credit is greater than 5,000 dollars, advance payments will be freely agreed between the creditor and the debtor.
- If the amount of the credit is equal to or less than 5,000 dollars, prepayment implies the payment of the anticipated capital and the interest calculated until the effective payment date plus the prepaid commission.
- Advance payments of less than 25% of the balance of the obligation will always require the consent of the creditor.

As agreed in the deed, the partial prepayment of the mortgage loan may be dedicated between:

- Reduce the value of the dividend.
- Reduce the term (provided the bank offers that alternative).

## What should I do to prepay my mortgage loan?

To prepay a mortgage loan you must go to your account executive or to the branch of the client and request a prepayment settlement of the mortgage loan in advance, referred to in article 31 of the Sernac regulation for Mortgage Credit.

This settlement usually contains the amount of unpaid capital, interest accrued since the last dividend paid and additional interest corresponding to prepaid costs.

The exact value will be the one corresponding to the day in which the prepayment is formally made.

Before making the prepayment of the mortgage loan you must have fulfilled the following obligations:

- Be up to date on the payment of dividends.
- If the credit is not up to date, it is necessary to pay the outstanding dividends plus the expenses associated with the late payment.
- Have the necessary funds to prepay the loan (capital + interest + prepaid commissions).

Once all of the debt has been prepaid and there are no other obligations secured by the corresponding guarantee, the bank will carry out the procedures for the lifting of the liens that are constituted on the property, including the entry of the deed of rise in the Property Conservator Estate.

## What is the cost of prepaying my mortgage loan?

In the case of mortgage mutuals, the bank may charge a prepaid commission . This can be:

- In the event that the capital does not exceed the equivalent of $ 5,000, the debtor may anticipate payment, even against the creditor’s will provided that, together with the payment of capital and interest, the prepaid commission is also paid. The amount of the commission will depend on whether the operation is resettable or non-resettable:
- If the operation is resettable, the commission may not exceed the value of a month and a half of agreed interest.
- If the operation is not resettable, the commission may not exceed the value of one month of agreed interest.

- When the payment made is less than 20% of the balance of the obligation, the law always requires the consent of the creditor. And the cost of the operation will be previously defined in the deed.

After the prepayment of the mortgage loan, the expenses generated by the granting of the public deed of uprising and income for its registration in the Real Estate Conservator are charged to the bank . If you want to know more about this, you can check the following post: How much does a mortgage cancellation cost?

## When is it convenient to prepay a mortgage loan?

Prepayment of a mortgage loan can have the following advantages:

- Improve your cash flow: paying your mortgage credit in advance means that you will no longer have to cover the dividend monthly, so you can have that part of your monthly salary for other expenses.
- Save interest payment.
- Increase your assets by reducing a debt and releasing a fixed asset of charges. Thus, it will be easier for you to obtain another loan in case you need it.

However, it is not favorable to prepay at all times, but will depend on factors such as interest, other investment options or having to use that amount for unforeseen expenses.

If you have a surplus in your income but you have other short-term debts, you must establish priorities, and pay first those that involve you with a higher interest quota.

If you have a surplus in your income but your mortgage is adequate and you comfortably pay your monthly installment, you may be more interested in investing that money in something else.

It is advisable to make advance payments during the first 5 or up to 8 years of the mortgage, since it is the period of time in which more interest is paid and less capital is contributed.

As you can see, it is possible to prepay mortgage loans , both totally and partially. But before doing so, it is convenient to read in detail the conditions and prepaid procedure established in the deed and be sure if it is convenient or not to make the advance payment of the credit at that time.

Remember that if you have any questions or require more information, you can ask your question below and we will answer you as soon as possible.